India’s retail inflation edged higher in April as rising food prices pushed consumer inflation closer to the Reserve Bank of India’s medium-term target, even as concerns grow over the impact of elevated crude oil prices amid the ongoing West Asia crisis.
Data released by the government on Tuesday showed retail inflation, measured by the Consumer Price Index (CPI), rose to 3.48% in April from 3.40% in March. The reading, however, came in lower than Reuters economists’ expectations of 3.8%.
Food inflation accelerated to 4.2% in April compared with 3.87% in the previous month, indicating growing pressure on household expenses as prices of essential items firmed up.
The inflation print comes at a time when global crude oil prices have surged sharply due to escalating geopolitical tensions in West Asia and fears surrounding disruptions in energy supplies.
Economists say India’s inflation outlook is becoming more uncertain as higher global oil prices begin feeding into domestic costs in the world’s third-largest oil importer.
The pressure is also visible in currency markets, with the rupee falling to a fresh all-time low against the US dollar earlier on Tuesday amid rising concerns over India’s import bill and external-sector pressures.
Analysts have warned that persistently high crude oil prices could widen India’s current account deficit, weaken the rupee further and increase inflationary pressures across sectors ranging from transport to household essentials.
The latest inflation data may also influence expectations around the Reserve Bank of India’s future policy stance.
The RBI has kept interest rates steady so far amid relatively moderate headline inflation, but economists say a sustained increase in fuel and food prices could reduce room for future rate cuts and potentially shift the policy conversation towards inflation management later this year.
Food inflation has now been rising steadily for several months, even as broader price pressures remain relatively contained.
In March, retail inflation had risen to 3.40% from 3.21% in February, while food inflation climbed to 3.87% from 3.47%.
Economists are also watching monsoon forecasts closely, with concerns that below-normal rainfall could further increase food prices in the coming months.
The inflation data comes amid broader discussions around fuel conservation and import management after Prime Minister Narendra Modi recently appealed to citizens to conserve fuel, avoid unnecessary foreign travel and postpone discretionary gold purchases amid rising global uncertainty.
While the government has not directly linked those remarks to inflation risks, economists say periods of elevated crude oil prices and currency weakness typically increase pressure on India’s inflation outlook, foreign exchange reserves and import bill.